In two recent decisions the National Labor Relations Board overruled precedent that had allowed unionized employers to lawfully change terms and condition of employment if the changes were consistent with past practice or an expired management rights clause.

Contrary to Raytheon Network Centric Systems, 365 No. 161 (2017), the Board held in Wendt Corp., 372 NLRB No. 135 (2023) that employers may no longer lawfully make unilateral changes to terms and conditions of employment by showing that they are similar in “kind and degree” to changes the employer had a practice of making previously.In the same decision the Board also held that an employer may not defend an unfair labor practice charge alleging that a unilateral change violated Section 8(a)(5) of the National Labor Relations Act (NLRA) by citing a past practice of making such changes before the union was certified. In a separate decision, Tecnocap LLC, 372 NLRB No. 136 (2023), the Board held that discretionary changes made pursuant to the terms of an expired management rights clause are unlawful.

The Board Sways Over What it Considers a “Change” to Employment Conditions  

Sixty years ago, the Supreme Court in NLRB v. Katz, 369 U.S. 736 (1962) held that an employer must refrain from making unilateral changes to employment conditions unless the union first receives notice and opportunity to bargain about the change. While Katz remains settled law, National Labor Relations Board continues to sway over what constitutes a “change” to employment conditions.

For decades following Katz, employers were allowed to rely upon practices arising under management rights clauses to continue making similar post-contract expiration changes to employment conditions without violating Section 8(a)(5) of the NLRA. The reasoning, sound in nature, was that making such decisions was a continuation of the status quo rather than a “change” in employment conditions.

In 2016, the Board in E.I. du Pont de Nemours, 364 NLRB 1648, 1648 (2016) upended decades of precedent by holding that “discretionary unilateral changes made pursuant to a past practice developed under an expired management rights clause are unlawful.” The decision effectively erased practices that had been part of the parties’ bargaining relationship, finding that nearly any discretionary action by the employer constitutes an illegal “change,” even when nearly identical to actions the employer had been taking before the contract expired.

A year later, in Raytheon Network Centric Sys., the Board overruled E.I. du Pont de Nemours and returned to the familiar understanding of what constitutes a “change” in employment conditions. Under Raytheon, “regardless of the circumstances under which a past practice developed – i.e., whether or not the past practice developed under a collective bargaining agreement containing a management rights clause authorizing unilateral employer action – an employer’s past practice constitutes a term and condition of employment that permits the employer to take actions unilaterally that do not materially vary in kind or degree from what has been customary in the past.” (emphasis added).

Wendt and Tecnocap Create Risk and Uncertainty for Employers

Wendt involved allegations that the employer violated Section 8(a)(5) during bargaining of a first contract by unilaterally instituting temporary layoffs. Relying upon Raytheon, the employer asserted that it had a longstanding, regular and consistent past practice of ordering layoffs that were similar in kind and degree to the layoffs at issue in this case.

On remand from the D.C. Circuit, the Board held that the employer failed to show a consistent practice of layoffs because there were two five-year stints between 2001 and 2014 when layoffs did not occur. Although the case arguably did not present the question, the Board went on to hold that Raytheon’s “kind and degree” test was inconsistent with Katz and undermined the process of collective bargaining. The Board also held that an employer may not make discretionary changes that rely on practices that existed before employees were represented by a union.

The Tecnocap case involved successor contract bargaining during which the employer unilaterally implemented 11-hour and 12-hour work shifts in response to business volume. The employer said it would evaluate the necessity for the shifts on a weekly basis. It claimed such actions were consistent with practices that originated under the management rights clause of the expired CBA. Recognizing that Wendt did not specifically address this issue, the Board overruled “Raytheon’s holding that a past practice developed under a management rights clause authorizing discretionary unilateral employer action constitutes a term and condition of employment that permits continued unilateral conduct following expiration of the agreement containing that clause.” 

Practical Recommendations for Employers

Through these two decisions the Board has called into question employers’ right to follow practices they have previously relied upon to make decisions impacting the operation of the business. The Board’s decisions underscore the value of securing contract language specifically providing that management rights clauses and other provisions acknowledging management’s right to operate the business in its discretion will continue in effect after contract expiration.  Employers currently evaluating bargaining obligations based upon practices or expired contract language should evaluate whether the contemplated action has been stymied by the recent decisions or may be permitted by other legally recognized exceptions to the obligation to give a union notice and opportunity to bargain.